5 reasons to buy solar stocks in 2011

The so-called “nuclear renaissance” is dead in its tracks as the world watches the on-going tragedy unfolding in Japan. Solar power could be the biggest beneficiary in the quest for viable, renewable power moving forward. Here are five reasons to consider adding solar stocks to your portfolio in 2011.

The so-called “nuclear renaissance” is dead in its tracks as the world watches the on-going tragedy unfolding in Japan. Solar power could be the biggest beneficiary in the quest for viable, renewable power moving forward. Here are five reasons to consider adding solar stocks to your portfolio in 2011:

1) Anti-nuclear sentiment. The tragedy that’s still unfolding in Japan has spurred nuclear power protests around the world – particularly in Germany where the BBC reports 200,000 people turned out over the weekend to demand the immediate closure of the country’s 17 nuclear power plants. Alternative energies including wind and solar look like obvious winners in the post-quake world. Even coal seems preferable to the risk of contaminating a country’s food and water supply with radiation.

2) China’s five-year plan. China’s ambitious, forward-looking energy initiatives aren’t so much the product of a desire to be green as they are a realization that the country’s going to need energy in every form it can get its hands on in the coming years. Wayne Chang with New York-based investment bank Brean, Murray, Carret & Co. speculates with Barron’s that China’s soon-to-be-announced “five-year plan” will call for the PRC to boost its renewable energy supply from 8.3 percent to 11.4 percent by 2015. That could mean the country will be installing 60 gigawatts worth of solar energy producing panels per year by 2020.

3) Government subsidies. Government dollars that were earmarked for nuclear power could easily find their way into the renewable energy space. Of the 62 reactors slated for construction around the world, 27 were supposed to be built in China. Even there, though, the government has temporarily suspended approvals for nuclear power plants, and some of that money that would have went toward nuclear power could find its way into more palatable energy solutions. If it happens in China, it’ll certainly happen in Western countries from Italy to Spain and the United States.

4) Solar jolt in Japan. Before the quake, Japan accounted for roughly 10 percent of total worldwide solar production. Power and logistical disruptions in the country have idled several major polysilicon, solar wafer, cell and module manufacturers there, according to The Bedford Report. That could boost margins for solar producers in the near-term, and Jefferies analyst Jesse Pichel also sees solar energy, which is relatively fast to install, as a possible solution for getting Japan’s nuclear plants back in operating condition quickly. A “significant amount” of new photovoltaic power could start pumping into Japan’s power grid in the next few months, Pichel adds, as the country immediately begins installing panels to alleviate rolling blackouts.

5) Trading psychology. With even established solar companies trading at single-digit multiples, we could be in the midst of a profound change in the way investors look at solar stocks. “This is exactly the kind of environment that can launch 100 percent or 200 percent or even larger trading moves,” the gents at MercenaryTrader wrote recently. For several years, they argue, solar stocks have traded on liquidity-driven speculation. They’d surge up one quarter as momentum traders climbed on the bandwagon, only to crumple the next. If investors start to see the industry as a long-term play, solar stocks could finally be entering a buy-and-hold phase. Leading companies in the industry will transform themselves from spec plays to real, viable businesses. If you’re lucky enough to be holding shares in those companies, your rewards could be large.

1 thought on “5 reasons to buy solar stocks in 2011”

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